Michaelia Cash (WA, Liberal Party, Minister for Women) Share this | Link to this | Hansard source

I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

CORPORATIONS AMENDMENT (LIFE INSURANCE REMUNERATION ARRANGEMENTS) BILL 2016

This Bill amends the Corporations Act 2001 to better align the interests of financial advisers who sell life insurance products with their customers.

These changes represent the most significant improvements to the remuneration arrangements in the life insurance advice sector since the Wallis Inquiry recommendations were implemented in 2001. Consumers will benefit through improved quality of advice as a result of better alignment of interests, more product choice and enhanced competition.

In introducing this Bill today, the Government is implementing part of our broader commitment to ensure better consumer outcomes from the financial system, as set out in our response to the Financial System Inquiry. It is the product of hard work and compromise on the part of industry and I want to publicly acknowledge and thank industry for their constructive engagement. This Bill shows what can be achieved when Government, business and the community comes together to achieve better outcomes.

In particular I wish to specifically acknowledge the work of the Association of Financial Advisers, the Financial Planners Association and the Financial Services Council in working together to achieve sensible reforms for the sector which will benefit consumers through the provision of more appropriate advice and the long term sustainability of the industry.

Following the final industry agreement of November 6 2015 the industry participants had this to say:

The "Minister for Small Business and Assistant Treasurer the Hon Kelly O'Dwyer's statement on the way forward on life insurance advice is a positive first step in lifting industry practices to improve consumer outcomes," Financial Services Council (FSC) Director of Policy Andrew Bragg said.

The Financial Planners Association (FPA) welcomed the industry package as "fair and workable" and said that

"The Government‟s final response to proposals by The Hon Josh Frydenberg MP on 25 June and the FSI Report, is a sensible outcome that will help ensure the sustainability of the industry," CEO of the FPA Mark Rantall.

The Association of Financial Advisers (AFA) acknowledged the timely and collaborative approach taken by the Government and AFA National President, Deborah Kent said that the "reduced clawback to two years brings greater fairness to the Life Insurance Framework" and is "a great relief for our members, particularly those that own and operate small businesses."

The life insurance sector is vital for our community. Life insurance advisers and product manufacturers help to provide essential financial security to Australians and their families.

However, recent inquiries have shown that there is a clear need for change in the sector.

A series of reports have identified a range of worthwhile improvements. These include a review by the Australian Securities and Investments Commission, otherwise known as ASIC; the Trowbridge Review commissioned by industry; and the Financial System Inquiry.

The ASIC Review identified a strong correlation between high upfront commissions in the sector and poor consumer outcomes, including high lapse rates where consumers are 'churned' through products. It also found unacceptable levels of poor quality advice. In particular, 45 per cent of cases reviewed involved high upfront commissions failed to meet the relevant legal standard for financial advice. This is unacceptably high.

Rather than acting unilaterally, the Government asked industry to respond to ASIC's Review so that any reforms were driven by industry itself. The result of this was the Trowbridge Review, chaired by industry veteran John Trowbridge.

The Trowbridge Review recommended a package of reforms, including a significant reduction in upfront commissions to limit the inducement for advisers to write new products for consumers where the circumstances did not warrant it.

Further, the Financial System Inquiry recommended a complete abolition of the current upfront commission model for life insurance advice and a move to level commissions where the commission is the same for each year of the policy.

Following these reports, the Government called on industry to propose sensible and genuine reform. This Bill gives effect to the reform package agreed by the life insurance industry.

While the Corporations Act broadly bans conflicted remuneration in the financial services sector, life insurance policies held outside of superannuation have been largely exempted from this ban.

This Bill removes this exemption for life insurance advisers receiving conflicted remuneration, such as commissions, for life risk insurance products and enables ASIC to determine the acceptable benefits payable for these products.

Under the approach in the Bill, advisers will be able to receive commissions for selling life risk products, provided certain requirements are met. These requirements are twofold. Firstly, there is a cap on the size of allowable commissions. Secondly, they relate to 'clawback' arrangements, where a share of the upfront commission will be paid back to the life insurer by the adviser if a policy is cancelled (or the premium is reduced).

I will take each of these requirements in turn.

Upfront commissions, which provide an incentive for advisers to replace or 'churn' policies where there is no consumer benefit, will be significantly scaled down. ASIC will have the power to ensure that they will go from an average of 110 to 120 per cent of the premium today to a maximum of 60 per cent from 1 July 2018. Permitted ongoing commissions will be set at a maximum of 20 per cent.

Currently, upfront commission arrangements are the dominant remuneration arrangement, covering 82 per cent of advisers.

It is not uncommon for upfront commission models to pay 110 per cent of a new business premium to an adviser with an ongoing commission of around 10 per cent.

By reducing the incentive to churn clients through products, the new commission structure will provide a better basis for advisers to give advice that is more appropriate to consumer needs.

Commissions will be calculated on the total of the product premium, the product fee and frequency loading (the extra amounts charged to make payments on a monthly basis rather than annually).

No caps will be placed on level commissions, or on fee-for-service arrangements as these arrangements are less likely to result in an incentive to provide inappropriate advice.

The second element of permissible payments relates to clawback requirements.

Clawback, refers to the share of the upfront commission that will be paid back to the life insurer by the adviser if a policy is cancelled (or the premium is reduced). Under the industry agreement an insurer may recover 100 per cent of a commission from the financial adviser in the first year of a policy; and 60 per cent in the second year.

The clawback provisions will significantly reduce the incentive for advisers to unnecessarily replace policies after the expiration of the first year of the policy. At the same time, advisers will not be required to pay back the full amount of the upfront commission earned if the policy lapses in the second year of the policy.

The Government has responded to industry concerns about ongoing business viability by moving from a three to a two year clawback period. However, through these reforms the Government is ensuring that there are strong incentives to prevent replacement of policies where there is no consumer benefit.

The Bill gives ASIC the power to create an instrument which covers acceptable commissions and clawback amounts. The Government acknowledges that the final form of the instrument is a matter for ASIC, as the independent regulator.

Payments made to advisers by insurers on or after the commencement day come under the new legislation. The new legislation also applies to payments made to advisers under policies entered into before the commencement day but where the product is issued after the commencement day, subject to a three month grace period.

The Bill contains provisions which grandfather certain payments. These provisions are consistent with those introduced as part of the Future of Financial Advice laws and allow certain arrangements to continue to be subject to attract the current commission levels.

These legislative changes strike the right balance between protecting consumers and recognising the need for ongoing business viability and industry stability

The Government believes that consumer interests will be best served by a competitive life insurance sector which delivers products appropriate to consumer needs and includes both small and large participants.

Being such a significant reform to the sector, Government understands that it is important for business to have time to adapt to this change. That is why there are transitional provisions which scale down the maximum permissible upfront commission over three years.

Following a four week consultation period on the draft legislation, over 20 submissions were received. I thank people for their views and for taking the time to contribute to the development of this legislation during this time and part of the earlier reviews.

Industry also has a role to strengthen the quality of advice and insurer practices. The Financial Services Council will develop a Life Insurance Code of Conduct to set best practice standards for insurers. In addition, the life insurance industry will develop a new industry standard to widen Approved Product Lists to broaden the choice of products available to consumers.

ASIC will undertake a review of the reforms in 2018. If this 2018 Review does not identify significant improvement in product churn and the quality of advice, the Government will move to mandate level commissions, as was recommended by the Financial System Inquiry. The Bill enables ASIC to collect necessary information from industry to monitor and enforce the reforms, including in electronic form.

ASIC will also conduct a broader review of Statements of Advice. The objective of this review, which will commence in the second half of 2016, is to make disclosure simpler and more effective for consumers, as well as assisting advisers to make better use of these documents. The review will also consider whether the disclosure of adviser remuneration could be made more effective, including through prominent upfront disclosure of commissions. The Government will look favourably at any recommendations to achieve these aims.

The full details of the amendments are contained in the explanatory memorandum.

MIGRATION AMENDMENT (CHARACTER CANCELLATION CONSEQUENTIAL PROVISIONS) BILL 2016

The Migration Amendment (Character Cancellation Consequential Provisions) Bill 2016 makes a number of amendments to give full effect to the substantive amendments made by the Migration Amendment (Character and General Visa Cancellation) Act 2014.

The Character and General Visa Cancellation Act significantly strengthened the character and general visa cancellation provisions in the Migration Act to ensure that non-citizens who commit crimes in Australia, pose a risk to the Australian community or represent an integrity concern are appropriately considered for visa refusal or cancellation.

The Character and General Visa Cancellation Act also introduced:

The consequential amendments set out in this Bill will ensure that the mandatory cancellation- related powers are reflected consistently and comprehensively throughout the Migration Act, according to the original intent of the changes made in late 2014. This will ensure that the Government has the capability to proactively and robustly address character and integrity concerns.

In particular, the Bill will ensure that confidential information that is critical to decision making under the new character cancellation provisions is given the same level of protection that is currently afforded to confidential information relating to other character provisions in the Migration Act.

This Bill will also give full effect to the policy of mandatory cancellation, by putting beyond doubt that a non-citizen who is the subject of a mandatory character cancellation decision is available for removal from Australia if they do not seek revocation within the relevant time period, or are unsuccessful in having their visa reinstated.

Further, the Bill seeks to strengthen our ability to identify non-citizens suspected of being of character concern by aligning the definition of 'character concern' in the Act with the strengthened 'character test' in section 501.

Consistent with the original intent of the Character and Cancellation Act, this will facilitate the lawful disclosure of non-citizens' identifying information where a non-citizen is suspected of being of character concern.

This Bill demonstrates this Government's clear and continuing commitment to ensuring that non-citizens who pose a risk to the Australian community are dealt with effectively, efficiently and comprehensively.

I commend the bill to the chamber.

REGISTRATION OF DEATHS ABROAD AMENDMENT BILL 2016

This bill amends the Registration of Deaths Abroad Act 1984.

The primary purpose of this bill is to correct an anomaly in the Registration of Deaths Abroad Act 1984. The correction will allow the 'Registrar of Deaths Abroad' to register deaths in prescribed circumstances.

Under current arrangements, applicants can remain in a procedural 'limbo' as they negotiate with State or Territory registrars to register an overseas death. By permitting the appointment of a federal Registrar of Deaths Abroad, this bill will simplify the registration of deaths abroad.

The bill will provide the Foreign Minister with the flexibility to appoint any State or Territory registrar as the Registrar of Deaths Abroad.

The bill will also validate the prior appointment of the ACT Registrar-General as the Registrar of Deaths Abroad and any previous registrations of deaths under the Act.

The amendments will allow the Registrar of Deaths Abroad to register deaths that could have been registered under the law of a State or Territory, where the State or Territory concerned has provided notice that it will not register a death.

In order to ensure that only the Registrar of Deaths Abroad can register deaths under the Act, the bill removes any references to 'registering officers' from the Act.

I commend this bill to the House.

TAX AND SUPERANNUATION LAWS AMENDMENT (2016 MEASURES NO. 1) BILL 2016

Mr Speaker, this Bill is an important part of the Government's program to level the playing field for Australian businesses and restore integrity to Australia's tax system.

This Government is absolutely committed to creating a better tax system, with taxes that are lower, simpler and fairer.

We are committed to a tax system that ensures everyone pays the right amount of tax.

But we also want to make sure the tax system does not impose unnecessary red tape or inappropriately restrict taxpayers from conducting their affairs as they see fit.

This Bill modifies the scope of Australia's tax laws to make sure they apply fairly and appropriately.

Mr Speaker, Schedule 1 of this Bill, applies the goods and services tax (GST) to digital products and services imported by Australian consumers.

It levels the playing field – it ensures Australian businesses selling digital products and services are not disadvantaged relative to overseas businesses that sell equivalent products in Australia.

With the introduction of this Bill, the Government will require overseas vendors to collect and remit GST on the sale to Australian consumers of digital products and services.

Overseas vendors selling digital products or other services, such as 'apps' and downloads of digital content, will be required to register, collect and remit GST on their sales to Australian consumers.

As an example, a software subscription service provided by a resident supplier attracts the GST. However, currently a similar software subscription service provided by an offshore provider may not attract the GST. This creates an uneven playing field and may create distortions in consumer choices.

This legislation will apply the GST to the non-resident supplier, and thus, levels the playing field for Australian business.

This example highlights an anomaly that has existed in the GST system for some time.

Mr Speaker, when we came to Government, we inherited a tax system from Labor that had failed to keep pace with the changing times and with the growing importance of intellectual property, digital technology and integrated global supply chains.

This Government however is determined to reform our tax system and ensure that it is fit for purpose, modern and fair.

This measure is the product of this Government's extensive work with international tax authorities. Australia has been working with the G20 and OECD, alongside other stakeholders, to address weaknesses in the current rules that create opportunities for base erosion and profit shifting.

Action 1 of the OECD Base Erosion and Profit Shifting Action Plan deals with the tax challenges of the digital economy, including the difficulties of collecting value added taxes, such as the GST, on cross border sales in the digital economy.

This legislation applies the OECD destination principle, which recommends that consumption should be taxed in the destination country of the imported digital products or services.

The European Union has recently implemented this model, and several other countries, including Japan and New Zealand, are in the process of developing similar rules.

Mr Speaker, this measure will restore tax neutrality and level the playing field for domestic Australian businesses.

It is estimated to have a gain to GST revenue of $350 million over the forward estimates which will be allocated to the States and Territories, who have agreed to this measure.

Indeed, this measure is a result of significant stakeholder engagement, from both resident and non-resident businesses, and their advisors.

Mr Speaker, Schedule 2 of this Bill, implements an announced but un-enacted measure from the 2010-11 Budget, which seeks to avoid non-resident businesses from being drawn into the Australian GST system unnecessarily.

This measure is about reducing red tape and inefficiencies in our tax system so that businesses can get on with the task of creating jobs and growth.

It achieves this intent by limiting when GST will apply to supplies involving non-resident businesses.

The measure came from the Board of Taxation's Review of the Application of GST to Cross-Border Transactions.

The Board of Taxation identified that too many non-resident businesses were being drawn into the GST system on business to business transactions where it was not appropriate.

The measure ensures that fewer non-residents are unnecessarily drawn into Australia's GST system, reducing the costs of compliance for business and simplifying administration for the Australian Taxation Office.

Together these two measures ensure that only those overseas businesses that should be in our GST system are in the system and collecting GST on their sales to Australian consumers.

At the same time, businesses that shouldn't be caught in the system are removed, reducing red tape and simplifying administration and compliance.

These two GST measures, Mr Speaker, demonstrate the Government's commitment to simpler, fairer taxes.

Mr Speaker, Schedule 3 of this Bill takes important steps to improve Australia's taxation laws for primary producers.

The changes contained within this Schedule increase the flexibility of farm management deposits, a vital risk management tool for primary producers, to assist primary producers to become more self-reliant.

These changes were announced in the Agricultural Competitiveness White Paper on 4 July 2015, and are the product of extensive stakeholder feedback and consultation.

Farm management deposits help primary producers deal with uneven income between years, which frequently occurs as a result of weather variations, natural disasters and changing market conditions. These events are impossible for primary producers to predict or plan for, making it difficult for them to prepare financially.

The Farm management deposit scheme is an example of how the tax system can be designed to be fit for purpose and address the needs of the taxpayers to which it ultimately should serve.

Farm management deposits help primary producers manage their financial risk by allowing them to set aside pre-tax income from primary production in a special account which can be drawn from in later years. Income deposited is tax deductible in the year the deposit is made, and included in assessable income in the year it is withdrawn.

However, there are a number of restrictions currently placed on farm management deposits that impair their effectiveness.

Mr Speaker, this Government is committed to continuously seeking to improve our tax system.

These amendments, which are part of this goal, double the amount a primary producer may hold in their farm management deposits from $400,000 to $800,000. This will provide primary producers with the flexibility to manage even greater income volatility and better manage with the funds they have set aside when a downturn occurs.

Mr Speaker, these amendments also allow a primary producer affected by drought to access their funds held in a farm management deposit early if they need them. Farm management deposits usually need to be held for at least 12 months before they can be withdrawn. Currently, a primary producer that withdraws their funds held in a farm management deposit within 12 months as a result of drought will lose access to the tax advantages of that farm management deposit.

This schedule removes this tax impediment and allows a primary producer subject to drought to receive the tax benefits from a farm management deposit even though they have withdrawn some of their funds within the 12 months.

In previous years, a declaration of exceptional circumstances would also allow for early access. However, provision for an exceptional circumstances declaration was removed with the introduction of the farm household allowance, which replaced a number of ad-hoc forms of income support for primary producers.

Primary producers will now be able to determine their eligibility by referring to rainfall data on the Australian Bureau of Agricultural and Resource Economics website at the time of withdrawal, rather than waiting on a Ministerial declaration.

These amendments also provide primary producers with the flexibility to use farm management deposits as offset accounts for other business loans they hold. Currently, farm management deposits may not be used as a mortgage or other interest loan offset. The Government is removing these restrictions to allow farm management deposits to be used as an interest loan offset.

Financial institutions and primary producers may now determine what arrangements work best for them in relation to farm management deposits.

This measure will allow financial institutions and primary producers to use farm management deposits to reduce the interest a primary producer pays on a business loan.

Mr Speaker, in summary, both the GST amendments and the farm management deposit amendments respond to our changing economy and contemporary business needs.

The Coalition Government recognises that Australia's GST law needs to adapt to the increasing role the international digital economy is having on Australia.

Likewise, our domestic law and concessions need to adapt to the difficult conditions primary producers encounter.

The first of the GST measures ensures that overseas businesses pay GST on sales to Australian consumers.

The second GST measure reduces red tape by removing non-resident businesses from the GST system which should not be brought in.

Likewise, the changes to farm management deposits reduce red tape for primary producers, and provide primary producers with greater flexibility in dealing with farm management deposits.

These measures ensure Australia's taxes are up to date; and are fairer, simpler and fit for purpose.

TELECOMMUNICATIONS LEGISLATION AMENDMENT (ACCESS REGIME AND NBN COMPANIES) BILL 2015

The Telecommunications Legislation Amendment (Access Regime and NBN Companies) Bill 2015, which I am introducing today, is intended to enhance the regulatory framework for telecommunications; implementing, in part, the Government's response to the Vertigan panel. Given the importance of this sector to our economy and society, it is incumbent on us to ensure the regulatory regime operates as best as it can so that we have a competitive, innovative, and responsive telecommunications market.

On 11 December 2014, the Government set out a roadmap for reform in the telecommunications sector which will see several restrictive aspects of existing market regulation gradually replaced with enhanced, competition-friendly settings. The roadmap also outlined the Government's response to an independent review carried out by a panel of experts chaired by Dr Michael Vertigan AC.

The panel concluded, amongst other things, that the current regulatory structure should be adjusted to better support competition and recommended changes to this effect. Specifically, the panel considered that regulatory arrangements and processes should be better focussed and streamlined.

The bill contains measures that respond to recommendations made by the Vertigan panel to improve the operation of the telecommunications access regime and NBN Co's line of business obligations. These measures support the Government's objective of establishing a more competitive regulatory framework that will, in turn, provide greater certainty for industry and more innovative, effective and efficient service delivery for consumers.

The bill also includes amendments to provide continued certainty for NBN Co during the NBN's roll-out throughout Australia.

The bill better coordinates the interaction between the facilities access regime in Schedule 1 of the Telecommunications Act 1997 and the access regime in Part XIC of the Competition and Consumer Act 2010, making it clear that Part XIC processes have precedence in the regulation of access to facilities. This will provide greater certainty and clarity for the telecommunications industry.

It also introduces a new obligation to make it clear that access providers need to give access to in-building cabling that they own or control, where use of that cabling is necessary for the supply of an active declared service. This will mean that competing service providers are able to supply carriage and/or content services using a declared service over that cabling and this will provide greater certainty for access seekers.

To encourage greater service innovation on the National Broadband Network (NBN), NBN Co will be given flexibility in conducting pilots and trials of new services over its network through a relaxation of its non-discrimination obligations. Specific conditions, for example, a limit on the duration of a pilot or trial and a requirement to notify the ACCC, will need to be met for a pilot or trial to take place. If, at any stage, the ACCC was to reach the view that the pilot or trial did not meet these conditions (that is, it was not 'genuine'), the ACCC would be able to take enforcement action.

The bill includes a number of fine-tuning changes to improve the operation of the telecommunications access regime in Part XIC of the Competition and Consumer Act 2010. These changes will achieve greater consistency of approach in regulating access, streamline processes, and provide industry with greater certainty in relation to the operation of the regime.

The bill provides NBN Co with greater flexibility in its business operations by amending its line of business restrictions to permit it to dispose of surplus assets and to allow regulations to be made to relax restrictions on NBN Co supplying non-communications goods or services, or its investment activities. It does not mean that NBN Co will be able to sell retail services or that its line of business will expand beyond the provision of Layer 2 wholesale services.

The bill also modifies existing authorisations that allow NBN Co to operate a specified number of points of interconnection and sell its key services as a bundle, ensuring NBN Co can continue these practices under a price capping regime. These changes will mean NBN Co can continue to roll out the NBN according to its current design and business model with confidence, minimising delay and cost risks. As such, the bill supports the object of ensuring that superfast carriage services are reasonably accessible to all people in Australia, wherever they reside or carry on business. These authorisations, will cease once the NBN is built and fully operational, having served their purpose of facilitating the rollout.

The Telecommunications Legislation Amendment (Access Regime and NBN Companies) Bill 2015 makes some minor but helpful changes to the regulatory framework. Further legislation proposed for next year will deal with some of the more significant issues set out in the Government's telecommunications policy roadmap. This bill represents the first phase of reforms, promoting greater efficiency, transparency, competition and innovation in telecommunications services.

I commend the bill to the House. TREASURY LEGISLATION AMENDMENT (REPEAL DAY 2015) BILL 2016

Excessive and unnecessary regulation reduces productivity and investment, stifles job creation, creates uncer

Stephen Parry (President) Share this | Link to this | Hansard source

In accordance with standing order 115(3), further consideration of these bills is now adjourned to 10 May 2016.